Institute warms to carbon tax by 2013

By Sun Xiaohua (China Daily)
Updated: 2009-09-10 08:41

A Chinese government think tank is considering recommending financial tools to curb energy-sapping and heavily polluting industries.

A carbon tax, if put in place, would help China greatly cut greenhouse gas (GHG) emissions, experts said.

A study by the Research Institute for Fiscal Science under the Ministry of Finance suggested that a carbon tax could be introduced in 2012 or 2013, after the launch of a revised resources tax. The resources tax is based on the price of crude oil, natural gas and coal, among other commodities.

China wants to cut energy intensity by 20 percent and emissions by 10 percent between 2006 and 2010. Taxation is seen as a critical means to achieve these goals.

A carbon tax targets manufacturers that emit carbon dioxide (CO2), one of the major GHGs at the root of global warming. Under the plan, the burning of fossil fuels such as coal, petroleum products and natural gas would be taxed in proportion to their carbon content.

Su Ming, deputy director of the institute and leader of the study team on the carbon tax, said that in 2012, every ton of emitted carbon would be taxed about 10 yuan. That figure would quadruple to 40 yuan per ton in 2020.

Some energy and environmental experts are urging the government to take even more aggressive steps. Bigger levies would better stem the use of fossil fuels, they suggested.

Another study on climate change suggested that in 2012 20 yuan should be charged for every ton of carbon emissions, while in 2020 it should be 50 yuan, and 100 yuan in 2030.

That study was jointly carried out by the Energy Research Institute affiliated with the National Development and Reform Commission and the Chinese Academy for Environmental Planning under the Ministry of Environmental Protection.

Wang Jinnan, director of the Chinese Academy for Environmental Planning, said the timetable matches that of an international treaty on fighting climate change.

The year 2012 will see the start of a post-Kyoto Protocol era, said Wang. The United Nations has set up a basic framework for the GHG-reduction responsibilities for the developed and developing countries after that year. According to the framework, China is obliged to reduce GHG emissions in a measurable, reportable and verifiable way.

"With such an international background, 2012 is the best time to introduce a carbon tax," Wang said.

Eventually, China will take the lead in economic restructuring with a sustainable path.

"Taxation is the most effective tool to allocate natural resources, curb heavy industrial development and encourage technological breakthroughs," said Jiang Kejun, a researcher with the Energy Research Institute.

Jiang suggested that the government levy an energy tax first and then institute a carbon tax. The carbon tax would eventually replace the energy tax to become the single tax tool to regulate energy consumption and reduce CO2 emissions.

Jiang's study showed that an energy tax of 50 yuan per ton of coal would reduce the domestic appetite for energy by 6.3 percent, or about 126 million tons of coal annually. An energy tax of 120 yuan per ton would drive the demand for fuel down 16.2 percent, saving about 400 million tons of coal.

The money taxed on energy and carbon would be directed to encourage the development of renewable energy, clean coal technology, carbon capture and storage studies, according to Jiang.

"The Chinese people have to make a choice: a green environment and healthy life with reasonable increasing payments for energy, or a seriously polluted environment and damaged health with very cheap energy consumption," Jiang said.

Jia Kang, director of the Research Institute for Fiscal Science at the Ministry of Finance, said: "If China wants to realize sustainable growth, an environmental tax would be an inevitable tool. China already has the foundation, in terms of both economic growth and taxation policies, for introducing an environmental tax. I believe a carbon tax would be the first to be adopted."

(China Daily 09/10/2009 page39)